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This FTSE 250 share’s rocketed 18% to new record highs! This is why

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Investor appetite for UK shares remains flattish on Wednesday. Both the FTSE 100 and FTSE 250 are more or less unchanged from last night’s close. But soggy market sentiment hasn’t stopped the Softcat (LSE: SCT) share price from soaring following the release of fresh financials.

This FTSE 250 share was last trading at £18.35 each, up 18% from Tuesday night’s close. It is also the latest in a string of repeated record highs recently and means the Softcat share price has jumped 77% during the past 12 months.

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A FTSE 250 flyer

Softcat’s share price has exploded after the firm released strong interims and upgraded its forecasts for the full year.

The IT services giant said that revenues jumped 10.1% during the six months to January, to £577m. It’s a result that — along with Covid-19-related cost savings — propelled pre-tax profit in the period 41% higher to £57m. Meanwhile gross profit, Softcat’s preferred measure of income, rose 20.4% year on year to £134.5m.

The UK tech share claimed that “continued investment in our people and technical proposition throughout the pandemic has driven double-digit growth in average gross profit per customer from both new and existing customers.” This grew 11.5% year on year to £26,900. Softcat’s customer base edged 1.5% higher to number 9,600 too.

Business development to success and FTSE 100 250 350 growth concept.

Unlike many British firms, Softcat has continued to boost its headcount during the Covid-19 crisis. Employee numbers stood at 1,658 at the end of January, up 12% from six months earlier. The business also declined to take financial support from the government during the pandemic.

Thanks to the strong first-half performance and healthy cash generation Softcat hiked the half-time dividend to 6.4p per share. This is up almost a fifth from the 5.4p dividend it shelled out the year before.

What they said

Softcat chief executive Graeme Watt commented that “we are pleased with the strong performance in the first half of the financial year in which we continued to grow and take share in a market that has remained relatively resilient during the pandemic.” He added that sales declines amongst some of the FTSE 250 firm’s customers during the final quarter of the prior fiscal year had “diminished” in the current period.

Watt said that the temporary cost savings enjoyed during the first half of fiscal 2021 would normalise during the final six months. But he added strong trading has prompted the business to continue its recent habit of upgrading its full-year forecasts. Softcat said that “the second half has begun well and the Board is confident the Company will deliver a full-year result significantly ahead of its previous expectations.”

As I type City consensus suggests that Softcat’s earnings will rise 10% in the fiscal year to July 2021. This leaves the FTSE 250 company trading on a premium price-to-earnings (P/E) ratio of around 44 times.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Softcat. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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